Sunday, 23 February 2020

Former Executive Director of Standard Chartered Bank, Alex
Mould, has challenged the Resident Representative of International Monetary
Fund (IMF) claims that Ghana's debt servicing ratio to revenue for 2019 was
around 30 percent.

According to the financial expert, the figure quoted by the
IMF rep was not accurate. "It should rather be approximately 60%",
the former Banker noted.

He calculated that based on MoFEP data on Ghana's 2019
Fiscals released in February 2020, Ghana's interest payment was around GHC20
billion with debt amortisation (foreign debt alone) being about GHC11 billion.

"So adding interest and principal amortization
(however, only for foreign debt) total debt service for 2019 was around GHC31
billion. And, according to the Ghana Revenue Authority, domestic revenue
collected for 2019 was GHC52 billion", Mr Mould who is also the immediate
past Chief Executive of Ghana National Petroleum Corporation clarified.

"So in the ratio form; debt servicing to domestic
revenue is 31:52 (in GHC). This, in percentage-wise, total debt servicing to
domestic revenue will be approximately 60%.

"Even if he was referring to only interest payment in
the debt service number, which ordinarily includes debt principal amortization,
the interest-only-debt-service to domestic revenue is approximately 40% for
2019" he stressed.

Meanwhile, the IMF rep, Dr. Albert Touna-Mama, speaking at
the recent Graphic Business/Stanbic Bank Breakfast meeting described the 30%
debt servicing to revenue as twice as much compared to countries of similar
features.

He further revealed that, government total debt position as
at DEC 31, 2019 was GH¢215 billion, describing it as worrying the borrowing
rate of Ghana.

“When we think about debt and borrowing, I want to talk
about the fact that we don’t only measure it with respect to GDP. An important
metric that we look at and in the case of Ghana is a metric that is of concern,
that is, debt service to revenue.”

“We use debt service to revenue as a proxy of how
sustainable the debt of Ghana is. At the moment, that ratio is close 30
percent. When we take that for countries of similar features, it should be
below 18 percent. This is twice as much as what it should be. So, of course, we
are concerned about the borrowing of Ghana,” he explained.

The World Bank has cautioned Ghana against heaping its
external debt stating that the country is currently rated as a moderate to
high-risk debt distressed country.

It further warned that, Ghana must tread cautiously in order
not to cross acceptable thresholds of debt sustainability.

Consequently, the Finance Minister, Ken Ofori-Atta,
announced in the 2019 budget that government is projecting to achieve GH¢67.1
billion in total revenue, representing 16.9 percent of GDP, in the 2020 fiscal
year.

He noted that the country is expected to use GH¢21.7 billion
which translates to about 5.4 percent of GDP to service interest on its debt.

Of this amount, he further said domestic interest payments
will constitute about 76.3 percent and amount to GH¢16.6 billion.